When you draw up a financial plan for your company, always keep these three important points in mind
1. You should create your plan using predictions
You don't know what the future holds. This makes it difficult to create a financial plan when you have no direction.
That's why you need to do a financial forecast
for your business to predict what might happen. Use these predictions to create your plan.
Just remember, this also means your plan might not be 100% accurate all the time.
2. Your plan must be flexible
Because things change, you need to be flexible so you can make changes when necessary.
3. Your plan must be realistic
Stick to a realistic plan using your past experiences to help you see what you can hope to achieve with your plan. For example, there's no point in planning to produce 10 000 units of your product a month if, in the past, you've only sold around 7 000 units in a good month.
Now that you know what to keep in mind, follow these steps to create your financial plan…
With those three points in mind, I'm going to show you how to create an effective financial plan to help you avoid another financial loss this year.
*********** Best seller *************
Ten budget templates to forecast and manage your company's costs
You can use them individually or while you create your operating budget. You'll draw figures from these budgets so you can keep control of costs and maximise profit. Each budget chapter comes with a free Excel budget template for you to customise and use straight away.
Create a financial plan for your company in just six steps
Step 1: Analyse your financial records from the past three years
This helps you forecast your company's finances by seeing what trends you could expect this year. It also gives you an average for your income and expenses so you can make your plan realistic.
Step 2: Forecast your company's sales
To do this, work out the cost per unit of your products. Then, multiply that by the number of units you want to produce.
You can find the full process to do this in the Master Budget Series.
Look at your past sales figures to see the kind of sales you can expect this year.
Step 3: Add up your total expenses for last year
Check to see if any of your expenses increased thanks to inflation. Then add all those expenses together to see what your total costs are.
Step 4: Subtract your total costs from your expected income
This will show you the profit or loss you can expect to make.
Step 5: If you predict a loss, draw up a budget that controls spending
This budget is important because it will help you reduce your expenses so you can avoid making a financial loss.
Step 6: If you predict a profit, draw up a budget that protects this
If you make a profit this year, the last thing you want is to suddenly lose it because of unexpected costs. Budget for emergencies and unexpected costs so you don't need to give up your profit to deal with them.
There you have it! Use these six steps to create an effective financial plan that will stop your company losing money this year.
To make the process even easier, get your hands on the Master Budget Series
and use its budgeting templates to quickly draw up your budgets.